Recording Transactions of Bill of Exchange:
For the purpose of accounting, bills are
classified under two heads:
-
Bills receivable
-
Bills payable
Bills Receivable:
A bill of exchange is treated as a bill
receivable by one who is entitled to receive the sum due on it. When we draw
a bill or receive it by endorsement from our debtors, it is our bill
receivable (B/R) and on maturity of such bill if it is held up to that time,
we shall receive specified amount from the acceptor.
Bills Payable:
A bills payable is regarded as bill payable by
one who has to pay it on the due date. When we accept a bill and thereby
become liable to pay on its maturity, it is our bill payable (B/P).
It means the same bill is a bill receivable to
one party and a bill payable to the other.
The accounting aspect of a bill of exchange
can be divided into following parts:
-
When a bill is drawn, accepted and discharged.
-
When the drawer discounted it with the bank
-
When the drawer sends it for collection to the
banker.
-
When the drawer endorses it to a third party
-
When a bill is dishonored.
-
When a bill is renewed for another period of
time.
-
When a bill is retired.
-
When there is an accommodation bill (including
the insolvency of one of the parties).
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